Income related ESA and equity release to buy out ex partner from home

Hi there,

It would be great if you can help with my query.

My client bought a property with her ex. Ex put 15% in. When son graduates uni, ex will get 15% back according to terms of divorce. Client has a mortgage with 4 years left. Client has been looking into getting a lifetime mortgage – would get £70,000 to pay ex, would then pay interest on mortgage for its duration. If she went to care home, or died would have to pay back.

This will allow her to stay in her home without having to sell her home and move elsewhere. She would immediately give the £70,000 to her ex.

Client wants to know how this will affect her income related ESA. Will the £70,000 be treated as notional capital if she immediately pays it to her ex?

CPAG 20/21 says the following which implies that the £70,000 might be ignored:

CPAG p491
A loan to you usually counts as money you possess and therefore counts as capital. However, you can argue that a loan you hold for someone else should be disregarded if it is your own asset but you have expressed a clear intention that it is for someone else’s benefit and and renounced its use for yourself.

p508. Deductions are made from the gross value of your capital for any debt or mortgage secured on it.

Can anyone confirm that her ir ESA will be unaffected if my client goes down this route?

Many thanks!

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